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As a pioneer of sustainability investing, the new policy aims to make clear how seriously the challenges of climate change are taken by the company.

Having such a clear policy is becoming increasingly important as clients seek to address challenges relating to the Paris Climate Agreement, the recommendations of the Task Force on Climate-Related Financial Disclosures, and the requirements of their beneficiaries.

Five policy pillars

There are five pillars to the Robeco Climate Change policy:

Integrating ESG into the investment process

Using active ownership to effect change

Decarbonizing portfolios

Divesting carbon-intensive thermal coal

Reducing our own carbon footprint

The policy will be rolled out across the company globally. Part of the climate change policy is that the carbon footprint of the sustainability funds will be reduced by at least 20% against the benchmark, and divesting from thermal coal activities, with a 20% threshold for power generators and 10% for mining operators.

Robeco has worked closely with RobecoSAM in developing this policy. This has included determining the levels of ambition and the exclusion thresholds. Both work together in integrating sustainability and climate change issues into investment decisions. RobecoSAM also provides the environmental impact data and the fossil fuel screening that will underpin the implementation of the policy.

“Robeco acknowledges the responsibility of the investment industry towards climate change risks through the investment decisions that we make and the contact we have with investee companies and other institutions,” says Carola van Lamoen, Head of the Active Ownership team and a co-author of the new policy.

“We aim to make our contribution to the Paris Agreement ambition to keep the global temperature rise well below 2 degrees Celsius above pre-industrial levels, and to pursue efforts to limit the temperature increase even further to 1.5 degrees Celsius. We also recognize the contribution that companies can make to the UN’s Sustainable Development Goals by addressing climate change risks.”

“RobecoSAM recognizes that climate change is among the most challenging and most complex sustainability issues, and that it is inextricably linked to many of the other topics we are concerned with, such as water scarcity, sustainable agribusiness, or public health in developing nations. We are therefore keen to contribute our part in ways that best reflect our research expertise and comprehensive knowledge base”, says Daniel Wild, PhD, Head of Sustainability Investing R&D at RobecoSAM.

Enhancing the investment process

The first pillar builds on Robeco’s existing holistic approach when integrating environmental, social and governance (ESG) issues into its investment processes. Robeco is convinced that systematically considering material ESG factors such as climate change risks into the investment processes ultimately leads to a better-informed investment decision.

Robeco addresses climate change risks through considering business models, corporate climate change strategies, and products and services. By including the analysis on climate change in the investment process, the company’s fundamental analysts have a better view on the risks (and opportunities) that companies are exposed to.

Using active ownership

In terms of active ownership, Robeco has a long track record of engaging with companies on their sustainability practices, in an effort to improve them. This includes engagements with greenhouse gas-intensive industries such as oil and gas, utilities, automotive, extractive, cement and real estate.

“We encourage the implementation of proactive and ambitious environmental strategies, the pursuit of operational excellence, the creation of asset portfolio resilience, the innovation of business models, and responsible participation in the public policy debate,” says Van Lamoen.

Decarbonizing portfolios

To decarbonize portfolios, RobecoSAM’s Environmental Impact Monitoring tool measures the impact of investors’ portfolios in terms of their carbon emissions, energy and water consumption and waste production.

In close collaboration with RobecoSAM, Robeco has developed the methodology to be able to steer portfolios on these metrics. All Robeco sustainability investing portfolios will optimize their carbon footprint by having a carbon reduction target of at least 20% versus the benchmark.

Divesting thermal coal

Divesting is about withdrawing from companies that are unable or unwilling to correct certain inappropriate or unsustainable practices in relation to environmental and climate change issues.

The sustainability investing portfolios are divested from mining companies with more than 10% of revenues derived from thermal coal, and from power producers with more than 20% of thermal coal-related revenues. Robeco recognizes that meeting the Paris Agreement ambition requires continual reduction in greenhouse gas emissions. Consistent with this, these thresholds for thermal coal exclusions are set to be lowered in the coming years.

Thermal coal is a product that is predominantly used in power generation and is a more carbon intensive source of energy than any of the alternatives such as oil and natural gas. We expect to see companies reducing their dependence on thermal coal in the future and aim to adjust our threshold lower in the coming years.

Reducing our own footprint

Finally, Robeco acknowledges that its own operations generate a carbon footprint and seeks to “practice what you preach’ by cutting its own energy consumption and water use.

The move of the company’s Rotterdam head office to a new state-of-the-art sustainable building in May 2016 is a good example of this. Robeco compensates its carbon emissions on an annual basis and is certified ‘CarbonNeutral’ in accordance with The CarbonNeutral Protocol.”

Important information

The contents of this document have not been reviewed by the Securities and Futures Commission ("SFC") in Hong Kong. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. This document has been distributed by Robeco Hong Kong Limited (‘Robeco’). Robeco is regulated by the SFC in Hong Kong. This document has been prepared on a confidential basis solely for the recipient and is for information purposes only. Any reproduction or distribution of this documentation, in whole or in part, or the disclosure of its contents, without the prior written consent of Robeco, is prohibited. By accepting this documentation, the recipient agrees to the foregoing This document is intended to provide the reader with information on Robeco’s specific capabilities, but does not constitute a recommendation to buy or sell certain securities or investment products. Investment decisions should only be based on the relevant prospectus and on thorough financial, fiscal and legal advice. Please refer to the relevant offering documents for details including the risk factors before making any investment decisions. The contents of this document are based upon sources of information believed to be reliable. This document is not intended for distribution to or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. Investment Involves risks. Historical returns are provided for illustrative purposes only and do not necessarily reflect Robeco’s expectations for the future. The value of your investments may fluctuate. Past performance is no indication of current or future performance.

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